Rice benefits from USDA market programs

Two of the most successful public/private partnerships for agriculture are the Market Access Program and the Foreign Market Development Program.

MAP, formerly the Market Promotion Program, was authorized as the Targeted Export Assistance Program in 1985 and was intended to compensate U.S. exporters for markets lost to unfair foreign competition. Since its inception, the program has broadened in scope and is now targeted at developing foreign markets for U.S. exports.

The FMD program uses funds from USDA’s Commodity Credit Corporation to create, expand and maintain long-term export markets for U.S. agricultural products and was first established under the authority of Public Law 480 in 1955. The FMD was re-authorized by Title VII of the Agricultural Trade Act of 1978.

USDA’s Foreign Agricultural Service recently commissioned IHS Global Insight, a private economic and financial firm, to analyze the effects of the two programs. The results showed the various and positive ways MAP and FMD help U.S. farmers and agricultural industries through increased exports, reducing spending by the federal government in the form of farm payments.

Increased exports help support jobs, not only in local communities but also in complementary industries such as milling, packaging, equipment manufacturing and sales, and transportation.

Using econometric models for bulk commodities and high-value products, Global Insight isolated the unique long-term trade impacts of market development programs. Its findings showed that the multi-year impact of the increase in market development expenditures from 2002 to 2009 by both industry and government equaled $35 in agricultural export gains for each dollar invested.

While both high-value and bulk export categories see benefits well beyond the original year of the investment, high-value agricultural products see returns for more than seven years, and bulk commodities see returns for about three years. USA Rice promotes rice both as a bulk commodity (rough rice exports to Mexico, Central America and South America, and Turkey) and as a high-value product (milled rice to the rest of the world).

In addition, the total gain for the U.S. economy from increased agricultural market development activity is estimated at an average of $1.1 billion annually from 2002 through 2009. So these programs not only help the specific commodities, but also the U.S. economy as a whole, keeping and creating jobs in the rural economy and beyond.

The programs were shown to help increase the U.S. share of the agricultural export market, which rose from 18.6 percent in 2002 to 19.9 percent in 2009, while the value of the exports rose from $90.5 billion to $96.1 billion. Technical assistance and trade servicing (including trade policy support, which USA Rice frequently utilizes) accounted for 60 percent of USDA’s market development programs, while consumer promotions accounted for only 20 percent. This is an approximate representation of USA Rice’s international promotion activities funded by these programs.

In developed countries especially, reaching consumers is an expensive proposition, so the limited funds are usually more effectively invested in servicing trade and concentrating promotional efforts on the foodservice industry (hotels, restaurants and institutional users).

The USDA funding is designed to supplement, not supplant, the industry’s international activities. Industry contributions, when added to the current $234.5 million in government funding, bring the total level of market development program funding to more than $570 million per year.

USA Rice exceeds this industry contribution by a significant amount — with the rice industry contributing in cash or in-kind more than $4 for each dollar received from USDA. USA Rice receives approximately $5.2 million in funding from these programs, while the rice industry’s contribution totals more than $20 million.

Those who would advocate cutting these programs as a federal budget reduction measure should heed the authors’ findings, which showed that a 50 percent decrease ($280 million less) in government and industry spending in these market development programs would result in:

• U.S. share of rest-of-world imports declining by $8.9 billion from 2009 to 2018.

• The resulting reduced income and overall farm activity would cause farm assets to decline in value by $44 billion between 2012 and 2018 and government farm income support payments to increase by $60 million annually due to lower commodity prices.

As an added benefit to the government, the authors estimate that government spending for domestic supports (loan deficiency payments and countercyclical payments) fall about 30 cents for every $1 spent on MAP and FMD. The report concludes that the overall loss in economic benefits would be approximately 13.5 times greater than the savings taxpayers would see from not funding the programs and about 5.7 times greater than the combined cost reduction to taxpayers and cooperators.

This analysis clearly shows the benefit of these programs: MAP and FMD programs provide an important marketing tool to help U.S. rice farmers compete in a competitive global economy.